Friday, November 22, 2013

SEC Charges Colorado Man with Elder Fraud

United States Securities and Exchange Commission
The SEC charged a self-described institutional trader in Colorado with defrauding elderly investors into making purported investments in government-secured bonds as he used their money to pay his mortgage.

The SEC alleges that Gary C. Snisky of Longmont, Colo., primarily targeted retired annuity holders by using insurance agents to sell interests in his company Arete LLC, which posed as a safe and more profitable alternative to an annuity.  Investors were told their funds would be used to purchase government-backed agency bonds at a discount, and Snisky as an institutional trader would use the bonds to engage in overnight banking sweeps.

However, Snisky did not purchase bonds or conduct any such trading, and he misappropriated approximately $2.8 million of investor funds to pay commissions to his salespeople and make personal mortgage payments.

In a parallel action, the U.S. Attorney’s Office for the District of Colorado filed criminal charges against Sinsky.

According to the SEC’s complaint filed in federal court in Denver, Snisky raised at least $3.8 million from more than 40 investors in Colorado and several other states. Beginning in August 2011, Snisky recruited veteran insurance salespeople who could sell the Arete investment to their established client bases that owned annuities. The majority of investors in Arete used funds from IRAs or other retirement accounts.
The SEC alleges that Snisky described Arete as an “annuity-plus” investment in which, unlike typical annuities, investors could withdraw principal and earned interest with no penalty after 10 years while still enjoying annuity-like guaranteed annual returns of 6 to 7 percent.  Snisky emphasized the safety of the investment, calling himself an institutional trader who could secure government-backed agency bonds at a discount and save middleman fees.

Snisky’s sales pitch was so convincing that even one of his salespeople personally invested retirement funds in Arete. The SEC alleges that Snisky created and provided all of the written documents that the hired salespeople used as offering materials to solicit investors.  Snisky also showed salespeople fraudulent investor account statements purporting to show earnings from Arete’s investment activity.

 Following an initial influx of investors, Snisky organized at least two seminars where he met with investors and salespeople.  He introduced himself as the institutional trader behind Arete’s success, and encouraged investors to spread the word.  Snisky hand-delivered fraudulent account statements to investors attending the seminars to mislead them into believing their investments were performing as promised.

The SEC’s complaint against Snisky seeks a permanent injunction, disgorgement of ill-gotten gains plus prejudgment interest, and a financial penalty. As always, investors are left on their own to recover their losses, as the SEC does not pursue individual investor claims.

For more information visit | SEC Charges Colorado Man in Scheme Targeting Elderly Investors
The attorneys at Sallah Astarita & Cox include veteran securities litigators and former SEC Enforcement Attorneys. We have decades of experience in securities litigation matters. We represent investors, financial professionals and investment firms, nationwide. For more information call 212-509-6544 or send an email.
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